Mexico’s Resources Fuel The Texas Startup Economy

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Everything is bigger in Texas, and thanks to Mexico, that may be also soon be true of the state’s growing tech sector. Flush with cash, Texas’ proximity to Mexico gives the state’s tech companies distinct advantages over other regions, according to entrepreneurs and others involved in the state’s tech industry.

Mexico is Texas’ number one trading partner, a fact leaders from both regions often proudly tout in speeches. Historically much of this trade has revolved around maquiladoras, which in the 1990s were geared largely toward textile manufacturing, or auto parts. With Texas’ rising tech scene, startups are looking south to meet their manufacturing needs, or otherwise benefiting from the close proximity to Mexico.

“They say that San Antonio is the northernmost city in Mexico,” says Lorenzo Gomez, director of San Antonio startup incubator Geekdom. “We in Texas get the benefit when immigrants come into our country — it’s an injection, an infusion of entrepreneurs that most other places don’t get.”

Brownsville — at the tip of Texas, on the border and the Gulf Coast — is a great example of how companies may leverage Mexico’s manufacturers. SpaceX is set to build a rocket launch site there, and the maquiladoras that thrived in this region of Texas may be easily adapted to the type of high-tech needs a company like SpaceX would have, according to one local official.

“SpaceX would be hiring and developing 600 rocket scientists. We’ve already been contacted by a string of space-related and hi-tech companies wanting to expand their operations here,” said Gilberto Salinas, Executive Vice President of the Brownsville Economic Development Corporation (BEDC).

Plans for Brownsville include luring into town some of the 250 suppliers working with SpaceX in Texas, working with the local university to create a pipeline of talent to high-tech jobs, commercializing university innovations and more, Salinas tells me.

El Paso’s biomedical sector is growing by leaps and bounds, and the manufacturing facilities in Ciudad Juárez, on the other side of the border, are a part of that equation, said Emma Schwartz, President of the Medical Center of the Americas Foundation. The foundation is working on creating a cutting-edge medical center facility, biomedical infrastructure and talent pipeline in El Paso. Large companies are already manufacturing high-tech equipment in the area, she said, such as Johnson & Johnson employing about 8,000 people making pacemakers and heart stints.

“We have a strong manufacturing industry here; it was mainly textiles back in the 1980s, but there’s definitely a high-tech component that can be adapted as well,” Schwartz tells me.

A startup incubator in El Paso, the Hub of Innovation, has even created a special manufacturing partners program to help startups meet their manufacturing needs by finding facilities in Mexico, said Cathy Swain, the president and CEO. The region, she said, has one of the largest collections of advanced manufacturing in the country.

“For the first time in modern history the lines have crossed where China is no longer the obvious option — you have to look at Mexico,” said Alan Russell, president and CEO of Tecma Group, located in El Paso. Tecma has 20 manufacturing facilities in Mexico ranging from aerospace to medical devices to electronics.

China is no longer always the best manufacturing solution for a variety of reasons, Russell told TechCrunch, and this is great news for Texas’ biggest trading partner. Labor and shipping costs in China are rising at the same time that shipping times are longer, whereas in Mexico products can be shipped in the afternoon and delivered by morning. So Mexico is seeing more refurbishing of electronics that used to be done in China, he said, as well as manufacturing of fiber optics, coils, and transformers.

Proximity to Mexico has been a boon to Austin-based entrepreneur Anurag Kumar, for different reasons. The CEO of iTexico, an IT solutions company with most employees based in Guadalajara, is an ardent advocate of Mexico as a source for tech talent, and was recently awarded the 2014 National Entrepreneurship Award (Premio Nacional del Emprendedor) by the president of Mexico for making a positive impact on the economy.

Texas businesses have some very tangible benefits by working with Mexican talent and companies, according to Kumar, including: geographic proximity, cultural affinity, strong infrastructure and governmental support, low attrition, bilingual expertise in a growing market (Latin America) and a trained workforce. In a white paper he co-authored on the subject, Kumar noted that there are about half a million IT professionals in Mexico, making the country the fourth largest provider in the world.

But not all startups have found a benefit in Mexico’s resources.

Laura Bosworth is the CEO of TeVido Biodevices, a company that uses 3D printing technology and a person’s cells to print new nipples for breast cancer survivors. TeVido’s technology was created in El Paso, and after completing its first round of tests there, Bosworth said the region just doesn’t have the biotech facilities the company needs to continue to grow.

“I was hoping that the Medical Center of the Americas would have their facility ready to go,” Bosworth said. “I think maybe a year from now they might be ready.”

As far as Mexico goes for TeVido’s needs, she said maquiladoras aren’t well suited to startups that don’t need large scale production from the get go. So, TeVido is set to move to Austin, where there’s more biotech infrastructure available.

Texas has awarded about $205 million to early stage companies to pursue their ideas via the Texas Emerging Technology Fund, and many other entities throughout the state are doing their part to foment tech companies —from startup accelerators to university programs for student entrepreneurs. As Texas’ tech scene grows, Mexico is bound to play a part somehow, said Geekdom’s Gomez. Whether it’s Mexican startups and entrepreneurs, outsourced labor or maquiladoras, Mexico may just be Texas’ secret weapon in its race to out-innovate everyone else.